Savola unit growing says HSBC report

Riyadh, June 21, 2012

Savola Group’s retail operations, through its subsidiary Panda, are growing not only in terms of sales per sq m but due to increasing margins within the retail segment, according to a global research report recently issued by HSBC.

Sales per store are increasing at a much faster pace at Panda compared to other rivals in the market which indicate a change in consumer tastes and habits towards higher end stores and improving brand recognition due to the growing number of stores, the report said.

Panda currently has over 131 stores in the kingdom with plans to open 19 more this year providing more than 800 jobs for Saudi nationals.

In addition, the company has gained sufficient scale and absorbed all its acquisitions successfully with net income margins improving from 1.2 per cent in 2009 to 1.6 per cent in 2010 and to 2.2 per cent in 2012, the report said.

HSBC rated the company with an overweight rating and determined the target price at SR44 ($11.73) compared to SR35 ($9.33) which was the existing share price when the report was issued.

The Savola Group operates in three core sectors: food sector which includes edible oils, sugar, and pasta; retail sector through Al Aziziya Panda supermarkets and hypermarkets; and the plastics sector, which manufactures both rigid and flexible plastic products.

It also has a portfolio of strategic investments where it owns 29.99 per cent of Al-Marai fresh diary company, 49 per cent of Herfy foods & restaurant chain, 30 per cent of Kinan International real estate, and one of the founders of King Abdullah Economic City and Knowledge Economic City in Al-Madina Al-Monawarah.

The group has previously announced a record net profit from operations for the year 2011 amounted to more than SR1 billion ($0.27 billion), with an increase of 35 per cent. It also declared a forecast net income of SR1.2 billion ($0.33 billion) before capital gains for the year ending 2012. – TradeArabia News Service